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The Welfare State: why immigrant assimilation is virtually impossible
Posted by: McQ on Monday, March 17, 2008

Interesting article in the WSJ concerning Sweden's welfare state and the effect it has on entrepreneurship and the integration of immigrants.

The comparison begins with Sweden in 1950:
To start with, homogenous Sweden was already an egalitarian society with few social problems before the expansion of the welfare state. It is often forgotten that in 1950 Sweden had lower taxes, fewer trade restrictions and more hours worked per working-age person than contemporary U.S. — and yet was already blessed with essentially the same flat income and wealth distribution it has today, half a century after the expansion of the welfare state.

In the 1950s and 1960s, the integration of migrants worked quite well. The foreign-born had a 20% higher employment rate than native Swedes in 1950.
All is well, entrepreneur would most likely flourish and obviously, the assimilation of immigrants was working quite well.

Now, add a welfare system:
Half a century later, in the mature welfare state, the picture has dramatically changed. According to the latest figures, only 48% of non-Western immigrants are gainfully employed, which is 30 percentage points below the average. For this group, originating from places such as Turkey, Chile, the former Yugoslavia, the Middle East and North Africa, welfare dependency is nine times higher than for native Swedes.
In fact, as one immigrant to bucked the odds and became a successful entrepreneur asserts, the message to immigrants isn't one which encourages the course he chose:
Mr. Alian notes that many in his surroundings initially advised against becoming an entrepreneur: "Why should one start a business?" they asked. [...]Especially for immigrants, the first signal from Swedish society is not that you ought to work, let alone become self-employed. The message is that the state will take care of you.
The effect of that sort of a philosophy is both pernicious and far reaching:
High unemployment among immigrants is of course not confined to just Sweden or Scandinavia. Throughout Europe, governments have found that well-intentioned social insurance policies can lead to lasting welfare dependence, especially among immigrants. Belgium is the European country with the highest difference in employment rates between the foreign-born and natives. The images of burning cars in the suburbs of Paris that were broadcast around the world illustrate the kind of social and economic problems France is facing with its restive immigrant population.

Given the high barriers to entry, many immigrants in Europe no longer start accumulating essential language and labor market skills. This is in stark contrast with the situation across the Atlantic. For example, in 2000, Iranians in the U.S. had a family income that was 42% above the U.S. average. The income of Iranian immigrants in Sweden, however, was 39% below the country's average.


The high unemployment rate is not only a drain on public finances. It also removes the most efficient path to integration. Permanent welfare addiction has an adverse and long-lasting effect on immigrant communities and their norm formation.

When many adults in a neighborhood no longer work for their living, the younger generation is less likely to acquire necessary work ethics. If their role models are unemployed, chances are that they'll remain on the fringes of the host society as well. This can set off a vicious cycle of social tensions.
This is a cultural phenomenon which is most visible in the riots among "youths" in France burning cars in protests resulting from their lack of assimilation. As the article concludes:
Immigrants may interpret their lower social standing as caused by racism and discrimination. Many natives in turn may interpret the low employment rates of foreigners as a sign of their sloth. That's an explosive mix of misperceptions and social failings.
Sweden has been urged by the OCED to reduce benefits and job security rules substantially while allowing more individual wage flexibility as steps necessary to reduce immigrant unemployment and speed assimilation. But those suggested reforms are not at all favored by the very powerful unions and the elites who have built and control the welfare system. It is very unlikely any meaningful reform will be forthcoming there because of them.

An Iraqi immigrant to the US sums it up best:
Uri Harkman, a 60-year-old Iraqi who runs the fashion company "Jonathan Martin" in Los Angeles, says countries such as the U.S. and Australia, which reward work and entrepreneurship, are better fitted to integrating immigrants than "Social Europe." "In the European welfare systems," he says, "it is too easy to live off the government and there are simply not enough incentives to work."
What Sweden's, and, for that fact, Europe's experience teaches us is misplaced "compassion" in the guise of generous welfare benefits are incentive killers and are responsible for aiding the balkanization of immigrants instead of their assimilation. The question is, given the growing tendencies here in the country to model European welfare systems is whether we'll learn from their less that inspiring experience, or whether we'll choose to repeat them (and claim the only reason theirs hasn't worked is the right people weren't running the systems)?

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Previous Comments to this Post 

The problem with this is that the US is in obvious decline, while Europe is on the rise. Just look at the fall of the doller, the US housing bubble, the US deficit, and the illegal war in Iraq.
Written By: Don
URL: http://
It’s stupid, but the high benefits are still very popular among the voters. The welfare system (unemployment benefits, long-term sick leave, and pensions) has, for example, also been used well and long to fund unemployment in rural regions, among part-time workers, and others.

Furthermore, Swedes as a rule have miniscule savings, so any changes are seen by most as threats. "You know what you have, but not what you’ll get."

Written By: Tom
URL: http://
I last time I went to Sweden, I was a bit shocked to hear my upper-to-middle level manager host seemingly go out of his way to complain about how the government was "so much smarter" than he, with very heavy sarcasm added.
Written By: Neo
URL: http://
Yeah, Don, that’s why everyone is stampeding out of the US.... oh, wait....

Written By: SDN
URL: http://
Europe on the rise? Europe is dead. It’s old and frankly they just don’t give a damn anymore. That’s why they import Turks by the thousands, they have no one else to do the work.
I don’t know when the last time you were in Europe, but I just got back from there and you would have thought you were in the Middle East.
The dollar US being weak is only temporary. And what does US housing have to do with Europe? Again, it only a temporary problem. But nice try. Illegal war? Says who? Your professors? What the hell do they know. Don’t be ridiculous.
Don, in your spare time between classes, look up the last time the US showed a surplus in the treasury. I’ll save you the trouble, it was between the years 1929 and 1939, I am wondering Don, do those particular years ring a bell?
A deficit is not always a bad thing and a surplus isn’t necessarily a good thing. But don’t take my word for it, look it up!
Written By: Phillip
URL: http://
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